What You Need to Know About Bankruptcy Discharges in Colorado
Understanding bankruptcy discharges in Colorado is essential for individuals considering filing for bankruptcy. A bankruptcy discharge is a legal order that eliminates an individual’s obligation to pay certain debts. This means that after the discharge, creditors cannot pursue collection efforts for the discharged debts.
In Colorado, the two most common types of bankruptcy filings are Chapter 7 and Chapter 13. Each has specific criteria for debt discharge, and it's important to know how they differ.
Chapter 7 Bankruptcy Discharge
Chapter 7, often referred to as liquidation bankruptcy, allows individuals to eliminate most unsecured debts, such as credit card debt, medical bills, and personal loans. Once the bankruptcy court issues a discharge, debtors are no longer legally required to pay these debts. It typically takes about three to six months to receive a discharge after filing.
Eligibility for Chapter 7 in Colorado
To qualify for Chapter 7 bankruptcy, individuals must pass the means test. This test compares your income to the median income for a household of your size in Colorado. If your income is below the median, you’re generally eligible for Chapter 7. If it’s above, additional calculations will determine your eligibility.
Chapter 13 Bankruptcy Discharge
Chapter 13 bankruptcy allows individuals to create a repayment plan to pay back all or part of their debts over three to five years. In this case, the court provides a discharge after the successful completion of the repayment plan. This type of bankruptcy is often chosen by individuals who want to keep their property and catch up on missed payments, such as a home mortgage or car loan.
Eligibility for Chapter 13 in Colorado
To file for Chapter 13, individuals must have a steady income and unsecured debts below $465,275 and secured debts below $1,395,875, as of 2023. This makes Chapter 13 a viable option for those with a regular income who want to manage their debts without liquidating their assets.
Types of Debts That Can Be Discharged
In both Chapter 7 and Chapter 13 bankruptcies, certain debts can be discharged, including:
- Credit card debt
- Medical bills
- Personal loans
- Collection accounts
However, some debts are non-dischargeable, such as:
- Student loans
- Child support and alimony
- Tax debts
- Permanent judgments
Impact of Bankruptcy Discharge on Your Credit
A bankruptcy discharge will significantly impact your credit score, and it can remain on your credit report for up to ten years, depending on the type of bankruptcy filed. However, many individuals find relief in their financial obligations and can start rebuilding their credit responsibly.
Conclusion
Understanding bankruptcy discharges in Colorado is crucial for making informed financial decisions. Knowing the types of debt that can be discharged and understanding the eligibility requirements for Chapter 7 and Chapter 13 can help individuals navigate their financial challenges effectively. Always consider consulting with a qualified bankruptcy attorney to get personalized advice and support throughout the process.